Miner claims projects under threat

Flinders Mines
joined the Australian Stock Exchange in 2002 and since then has grown to be worth more than $200 million. Now Flinders managing director
Kevin Wills
says he fears for the future of its flagship project, with the new resource super profits tax set to bite into potential returns.

“It’s going to make it less of an attractive investment, so then we are going to be competing with other investments, and investors are going to be looking at returns they can get," Mr Wills said.

Given the less favourable tax regime for the company, investors might look elsewhere, Mr Wills said. Instead of profits going to shareholders, he feared there would be a larger tax bill.

“It could be harder to raise capital because investors will have other projects to invest in where they don’t have this extra tax," Mr Wills said.

Flinders Mines, which is based in Norwood, South Australia, focuses mainly on iron ore in the Pilbara, although the company is also exploring for diamonds and phosphates in South Australia and the Northern Territory.

The company is conducting a preliminary study of its Pilbara iron-ore project. Recently, it finished the first stage of metallurgical testing.

This quarter, the company is aiming to complete a number of tasks, including selecting its preferred mine design.

But the resource tax is set to make life far more complicated, Mr Wills said. “When you do your financial analysis of your project, obviously the amount of tax you pay has an impact on your return. There will be less profit available because more will be going in tax, so when you look at the rate of return, it’s going to be less."

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The tax could hit the industry hard and stop some new mining developments, Mr Wills said. “There would be some projects at the margins which are likely not worth developing now."

Tax payments also start as soon as a company makes money. “They are calling it a super profit tax, but it starts off on your first dollar of profit so it’s really just like a much larger corporate tax, or company tax," Mr Wills said.

Worries at Flinders Mines speak to a larger concern in the Australian mining industry, Mr Wills said. “It’s early days, of course, but I’m very concerned that it’s going to drive investment away from the country and we could be worse off overall."